Eurozone economy growth revised higher

The eurozone economy grew more rapidly than previously estimated in the three months to June, as a pickup in exports offset a slowdown in household consumption and a decline in investment spending.

The European Union's statistics agency also raised its estimate for growth in the first three months of the year. Its revisions mean the eurozone's modest recovery strengthened in the first half of the year, a development that may lead some members of the European Central Bank's governing council to question the need for any further stimulus as it strives to raise the currency area's inflation rate to its target of just under 2%.

Eurostat on Tuesday said the gross domestic product of the eurozone's 19 members increased by 0.4% in the second quarter from the first, having previously estimated that it grew by 0.3%. It also said GDP increased by 0.5% in the first quarter, having previously estimated growth of 0.4%. As a result, GDP was 1.5% higher in the second quarter than in the same period of 2014, up from a previous estimate of 1.2%.

A revival in exports helped support growth in the second quarter, likely reflecting the euros depreciation since the middle of last year as the ECB began to roll out a new wave of stimulus measures, the most recent of which is a program of government bond purchases that made its debut in March.

However, domestic demand slowed during the second quarter, with household consumption easing and investment spending falling by 0.5% compared with the first three months of the year, a development that will worry policy makers since it hints at a loss of confidence among businesses and households. Eurozone governments have identified increased investment spending as a priority for the currency area as part of its effort to halt a decline in the currency area's longer-term growth potential.

The revisions will likely come as a surprise to ECB rate setters. In a news conference last week, ECB President Mario Draghi painted a less upbeat picture of the eurozone's growth prospects, as the central bank's economists cut their growth forecast for the year to 1.4% from 1.5%.

In particular, Mr. Draghi highlighted slowing growth in a number of large developing economies which could weaken demand for exports from the eurozone. However, exports increased by 1.6% in the second quarter, an indication that the weaker euro may be allowing eurozone exporters to grab a larger share of world demand.

"The risks to the euro area growth outlook remain on the downside, reflecting in particular the heightened uncertainties related to the external environment," Mr. Draghi said. "Notably, current developments in emerging market economies have the potential to further affect global growth adversely via trade and confidence effects."

Economic data and surveys for the third quarter suggest economic growth has continued at the same pace as in the first half of the year. Surveys of purchasing managers last week indicated the eurozone economy grew more rapidly in August than July.

Eurostat's revision of its growth estimates for the first six months of the year were driven in part by an improved performance from Finland's economy, which had been thought to have contracted in both the first and second quarters. However, Eurostat now estimates that GDP was unchanged in the first quarter, and grew by 0.2% in the second, rather than contracting by 0.4% as previously calculated.

Eurostat also raised its second-quarter growth estimates for Italy--to 0.3% from 0.2%--and Greece--to 0.9% from 0.8%.